Wednesday, 6 February 2013.

3.45 pm

The Deputy Chairman of Committees (Baroness McIntosh of Hudnall): My Lords, I remind your Lordships that if there is a Division in the Chamber, the Committee will adjourn for 10 minutes from the sound of the Division Bell.

Companies Act 2006 (Amendment of Part 25) Regulations 2013

Considered in Grand Committee

That the Grand Committee do report to the House that it has considered the Companies Act 2006 (Amendment of Part 25) Regulations 2013.

Relevant document:16th Report from the Joint Committee on Statutory Instruments

Lord Popat: My Lords, I am grateful for the opportunity to debate the proposed regulations to reform and modernise the system for the registration of company charges. For many years I worked as a business and finance consultant, and I cannot stress enough the importance of a clear, transparent system that enables companies to access the finance they need and lenders to provide finance with confidence. This is particularly important in the current economic climate.

These regulations intend to modernise the system for the registration of company charges—a system which is more than 100 years old. The changes to this system of registration are intended to retain the fundamental principle of the current system, which is internationally well regarded, while making those critical changes that will allow this system to continue in a way that is effective and efficient.

Secured lending is vital to support economic growth. It allows companies to access the finance they need to grow and enables lenders to invest in a company with greater confidence. In fact, the World Bank, in its report Doing Business 2012: Doing Business in a More Transparent World, considered the laws relating to collateral to be crucial to supporting economic growth and transparency. The statutory schemes for registration of company charges contribute to the UK being rated equal first, with Malaysia, in the section on getting credit.

In the early 1900s, a system was conceived which required companies to register debt secured against their assets. This allowed lenders to see clearly whether assets were already encumbered and to offer finance with confidence. The fundamentals of this system remain and have been the subject of further reviews and consultations, including the Crowther report in 1970, the Diamond report in 1989, the 2001 recommendations of the Company Law Review and the most recent

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consultation led by the Department for Business, Innovation and Skills in 2010 on reforms to the system, based on the considerations of these earlier reviews.

Over the past 10 years there has been ongoing engagement with legal practitioners and academics as well as credit reference agencies and investors to determine what reforms should be made to this system. These stakeholders have generously offered their time and expertise to support our reforms and to test out how these may work in practice. This is vital in preventing unintended consequences later on.

The proposed system will deliver benefits to business of around £21 million every year through a reduction in unnecessary bureaucracy as well as a simplification and modernisation of the system.

I will now take a few moments to outline the key elements of the reforms. First, we have amended the regulations governing the system for the registration of company charges to take advantage of modern technology. Companies, legal advisers and accountants will now be able to submit the charge for filing electronically and will be able to pay their £13 charge electronically too. This has the twin benefit of reducing the time and bureaucracy of filing a charge, while also allowing the registrar to operate a more efficient system.

Secondly, the regulations set out a far simpler model for determining whether a charge is registrable. Lenders and companies want to be able to register charges so that they can invest or attract investment, but the complex list of types of registrable charges had led to confusion and wasted effort in simply ascertaining whether a charge could be registered. The new regulations place the onus rightly on the presenters of the charge to make this commercial decision, subject to a few clear exemptions where the registration of the charge was not in any way useful to the public, investors or companies.

Thirdly, following on from my previous point, the system recognises that the incentive on investors is to register their charge rather than risk it being void against a liquidator or administrator. In the rare instances where a company itself registers the charge, it is commonplace for investors to require the company to submit the charge for registration as part of the financial agreement. The existing criminal sanction is therefore entirely unnecessary and these regulations repeal it.

Fourthly, the system will deliver far greater transparency around financial arrangements as, due to the technological advances, the whole charge instrument or deed will now be available electronically in addition to the summary information. Of course, the regulations also include sensible safeguards against fraud and allow personal information, bank account numbers and signatures to be redacted.

Finally, the proposals will for the first time create a system that fits around the different property laws and processes that operate in different parts of the United Kingdom. Many lenders and companies operate across the UK and now they can take the same approach to the registration of the charges, regardless of where they are. I hope that nobles Lords will support these important reforms.

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Lord Stevenson of Balmacara: My Lords, I hope it is in no way a measure of the interesting comments made by the Minister in his introduction that the only other noble Lord who was present has fled quickly from the room and is therefore not in a position to respond to his kind invitation to speak, but that leaves the burden on me. I appreciate the way in which he introduced this change and want to make it clear from the start that we broadly welcome it. It is a good idea, but possibly rather later than perhaps it could have been, as the Minister hinted at in his introductory comments.

This has obviously had a troubled background in the sense that, as we discovered, the original consultation was in March 2010 and had to be reissued for further consultation a couple of years later before the department was able to come forward with a modified proposal. Therefore, my first question to the Minister is whether we ended up with a situation in which we have the least worst solution rather than the best solution. Just to amplify that, most people seem to want—and the majority of the responses within the impact assessment suggest this—a fully operable system, with all the detail. There were, however, a significant number of people who felt that that was going to be burdensome and difficult, so the compromise is neither one thing nor the other. I would be grateful if he could make a few remarks to illustrate what he thinks is the end result and how it meets the benefits specified in the documentation.

Secondly, I was having difficulty following the figures, possibly because there were two different consultations and two different levels of issuing comment. The summary document which accompanies the impact statement says that the impact on businesses is expected to be a reduction in the burden on those filing charges, generating a net savings of £21 million a year. However, the impact assessment itself says that the net cost to business will be about £21 million as well; I may have misread that, but I would like a comment on that from the Minister. It seems like a modest reduction, given the amount of effort that goes into registering charges. As the Minister said, this is at the heart of all business transactions involving inter-business acquisitions and sales; any lending going on will always require some sort of assessment of the overall capacity of the organisation to which it is being lent. Therefore, we are saying that this is a very modest change.

However, costs are not symmetrically based; they will fall on those who have to prepare and generate the new input documents which the document says will be recouped through efficiency savings over an estimated period of four years, but no evidence about that is given. I just want to be sure that these are really modest savings and would like it on the record that that is correct.

My third point is about the costs burden arising from moving to a new electronic system. We are all sceptical about the claims that are often made for these systems but this is by all accounts a rather simple one. It is a register that is not capable of doing very much more than simply holding data. Can the noble Lord give a bit of context for how much testing of this new register has been done and whether he is confident

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that it will be up and running and ready? Quite a lot of time has been spent preparing for it, after all, so I hope that it will be but I would like to be confident.

Finally, I trained as an accountant in Scotland, where one of the things that was drummed into me early on in my studies was the difference between the charging register system in Scotland and that in the rest of the country. In Scotland, it is not necessary to register all charges. There is very little mention of that in the Explanatory Memorandum while there is some comment on it in the impact statement. It would be for the benefit of the Committee if the Minister could simply mention what exemptions there are for Scotland and how they will be accommodated given that the overall aspiration of this move, which I do not dissent from, is to try to provide a simple system for the whole of the country despite the differences in responsibilities between the various territories.

Lord Popat: I thank the noble Lord for a number of the issues that he has raised on these regulations. First, let me explain the cost versus the benefits side. Currently, to register a charge the fee is only £13 but there is a huge cost to the businesses and companies when it comes to dealing with a large number of forms through their accountants, solicitors or agents for registration. Electronic transmission will be much easier, as when we do our tax returns and VAT returns electronically. A company can in fact register electronically a director or company secretary. Having business knowledge and a business background, I suppose that this is something that should have been done many years ago.

This is a welcome move for a number of organisations, in particular credit reference agencies, lawyers and accountants but, most importantly, the lenders themselves. It gives a lot of security to lenders because we can register a charge electronically within one day. Currently, the system takes as long as eight days. Lenders will be pretty well secured on day one of release of the money to the companies to which they are lending, so it is a much safer system than we have now.

In the old days, I remember that we used to rush to Companies House in London. Now, Companies House is based in Cardiff and there is also a 21-day time limit, so in that respect the cost saving to the companies is quite huge. Even if it takes roughly half an hour for the lawyers and their secretaries to do the necessary paperwork for company registration, that half an hour is charged as a cost to the client so that will be a saving. That is what the £21 million saving is all about. With regard to the cost of putting it in practice, which is something like £750,000, if you can imagine the time saved by Companies House staff in Cardiff in processing manual applications compared to electronic applications, I would guess that that £750,000 will be recouped in four years’ time. A lot depends on the number of applications going through electronically, which is currently about 90,000. If the numbers go up, recouping the cost will probably take less than four years.

This was taken to be a compromise on future lenders’ requirements and to simplify the particular archive held in their own system. I will explain what I mean by that. When their auditors come, companies are required to do company registration, with its charges. The auditors can actually get information electronically

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and that screen saves audit fees for the companies, so there is that advantage too. I am afraid that it was not a compromise.

On why this took so long, we obviously had a number of reports on this and took the necessary time, as it is a complex area. We engaged all the stakeholders, who are now largely satisfied, including the Law Society and firms of chartered accountants.

With regard to Scottish companies, this provision will apply to the United Kingdom throughout. The system is not different for Scotland in this respect. I believe that I have answered most of the noble Lord’s questions.

Lord Stevenson of Balmacara: My Lords, I do not think that the Minister quite got the grasp of what I was saying about Scotland. Scottish law does not require the automatic registration of all charges. In England and Wales you have to register them automatically. Therefore, given the Government’s drive for simplicity, I was asking whether the Minister could say a little more about how there can be a very simple and universal system, yet also allow Scotland the discretion to not register where that is appropriate. For instance, unincorporated companies do not need to register charges in Scotland.

While I am on my feet, I might add that the Minister did not answer my question about whether the system had been tested and to what extent he felt that it was fit for purpose and ready to implement.

Lord Popat: The draft form has been tested with the stakeholders and other learned registrars and the system works well.

Motion agreed.

The Deputy Chairman of Committees: My Lords, I think that the clerk is indicating, very sensibly, that we might need a moment to pause for officials to change but if that is not necessary, we will proceed.

Parental Leave (EU Directive) Regulations 2013

Considered in Grand Committee

4.01 pm

That the Grand Committee do report to the House that it has considered the Parental Leave (EU Directive) Regulations 2013

Relevant document:15th Report from the Joint Committee on Statutory Instruments

Lord Popat: My Lords, these regulations give effect to the 2010 parental leave directive. It is a revised directive, which repeals the 1996 parental leave directive. As the UK has fully implemented the 1996 directive, the regulations under consideration today are confined to giving effect to the changes arising from the revised directive. Before I elaborate on the legislative effect of

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the Parental Leave (EU Directive) Regulations 2013, let me state the purpose of the revised directive. It is to lay down minimum requirements designed to help working parents balance their work and family commitments.

The 2013 parental leave regulations do three things. First, they increase the number of weeks of parental leave for all parents from the current 13 weeks to 18 weeks. This transposes the requirement in the revised directive that parental leave should be granted for a period of four months. They make no other changes to the amount of parental leave available. Parental leave will continue to be available per parent per child but an employee will be entitled to 18 weeks rather than 13 weeks. Similarly, there will be no change to the age limits of a child whose parents are entitled to take parental leave—that is, five years old or 18 years old for a disabled child. They make no changes to the arrangements governing the use of parental leave—namely, the 12-month continuous employment qualification, notice requirements and the limit on the amount of leave which can be taken in a 12-month period.

In November, the Government announced a package of changes to leave for parents following the modern workplaces consultation during the previous year. As part of this broad sweep of changes to maternity and adoption leave, and the creation of shared parental leave, we will make parental leave available to all parents of children up to the age of 18.

The Government intend that these changes will be introduced in 2015. However, we are required to increase the number of weeks from 13 to 18 now so as not to be in breach of our EU obligations. We have decided not to make other changes to the age limit at this time but will raise the age to 18 years as part of the broader sweep of changes in 2015. The reason for raising the age later is that we understand from the business community that having the change in age as part of the creation of shared parental leave and pay will be easier in terms of familiarisation costs.

Secondly, the revised parental leave directive requires that parents returning from parental leave must have the right to request flexible working. Many employees who are parents and carers already have this right, but employed agency workers are currently excluded from the right, and this is not permitted by the new directive. The effect of Regulation 2, therefore, is that employed agency workers will have the right to request flexible working on return from a period of parental leave.

Finally, the regulations introduce a review clause and a duty on the Secretary of State to review and report on the workings of the regulations which implement the directive, five years after the regulations come into effect and at least at five-year intervals thereafter. This is not required by the directive but this Government consider that a duty to review the effectiveness of, and ongoing need for, regulations is central to good government and good law.

As part of the review, we will seek views from business and family groups and look to the research on family leave conducted by the Department of Business, Innovation and Skills. We will place copies of this report in the Library. I commend these regulations to the Committee.

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The Earl of Listowel: My Lords, I welcome this order and am particularly grateful that it includes adoptive parents, assuming that I have understood it correctly. Having worked in the past with children who are in the process of being adopted, I recognise that these are often children who have had very bad early life experiences and who can be very challenging for parents to care for. We know that one in five adoptive placements, unfortunately, fail and one can only try to imagine how awful that may be for the children involved. Any support that can be given to adoptive parents to make the best go of that placement is very much to be welcomed, which I do as vice-chair of the All-Party Parliamentary Group for Looked after Children and Care Leavers.

I welcome all policies which support the family. Our human capital is often overlooked. At a time when we are so concerned about the future growth of this country, it is important to think about investment in bridges, new train systems and better communications. However, we need also to bear in mind that our families and children are a vital component for future growth and that investing in human capital, and investing early in families, is an important means to seeing that we are a vital and competitive nation in future. I welcome this measure.

Lord Stevenson of Balmacara: My Lords, I am pleased to welcome this proposal. It is exactly what the Government should be doing and seems to do what is required. As the Minister said, it has been welcomed by those who have been consulted in the round. However, there is one caveat. The Minister explained why certain measures had to be brought forward at this point because of an EU directive requirement, but the general thrust of the approach to parental leave and to regularising the broader position is based on doing them at the last rather than the first possible moment. I do not need a response on that but I would like to record that it is obviously a matter of some regret that some of the good things that we see in this change to the regulations are going to be delayed, to the disbenefit of those who will be affected by them.

Will the Minister rehearse the timing of the extension to the age of 18? I ask that because the matter was raised when these regulations were considered in another place; there was an exchange about this of which I am sure the Minister is aware. I quote the Minister on that occasion, who said in response to a question from a Labour Member:

“The hon. Gentleman posed a fair question about why we are not raising the age to 18 at the same time”,

as the rest of the regulations which were going through with this order. The Minister said that the reason was straightforward—although it may be to the benefit of the Committee if it listens hard, because it is not at all straightforward to me—and that,

“we understand from the business community that having all the changes on shared parental leave and on pay and leave for parents in one go is easier in terms of familiarisation costs. For this small, discrete change, there is an earlier European Union deadline, and we want to make sure that massive changes do not happen at various times”.

That seems clear, and I understand its logic. She continued:

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“However, I give the hon. Gentleman the firm commitment that the Government’s policy is to raise to 18 the age at which the regulations apply”.—[Official Report, Commons, First Delegated Legislation Committee, 28/1/13; col. 7.]

Although she said that it was not going to happen at this point, the guarantee which the Minister wished to give was that the Government would move this forward. This has been repeated by the Minister again today.

Why have these things not been brought together? If the Government wanted to minimise the impact of familiarisation costs on business, it would seem more sensible to do all these, and apply them, at the same time, yet they chose not do to so. Perhaps the Minister could respond on that point.

Lord Popat: I thank noble Lords for their comments. I thank, as always, the noble Earl for his comments on children who are being adopted. Adoptive parents will be entitled to 18 weeks, as is everybody else, with leave to be taken within five years of the date of adoption; others would be from the date of birth. If somebody adopts a child of six years, the right will expire five years thereafter or when the child is 18, whichever is sooner.

The noble Lord, Lord Stevenson, asked why we did not bring the 2015 date forward. Consultation was done on a range of time limits: five, eight, 12, 16 and 18 years were proposed. Around 30% of the respondents called for no change, whereas 31% called for the age limit to be increased to 18. There was not much support for eight, 12 or 16 years. We therefore made the age 18. In order to minimise the cost to business, this change will only be introduced alongside the other changes in the system for maternity, paternity and shared parental leave. The change will therefore not be made through these regulations. Primary legislation is required, and will be included in the Children and Families Bill. I trust that I have responded to the noble Lord’s questions.

Enterprise Act 2002 (Part 8 Domestic Infringements) Order 2013

Considered in Grand Committee

4.14 pm

That the Grand Committee do report to the House that it has considered the Enterprise Act 2002 (Part 8 Domestic Infringements) Order 2013,

Relevant document:15th Report from the Joint Committee on Statutory Instruments

Lord Popat: My Lords, this is a short but not insignificant order that will enable the effective enforcement of the Consumer Protection (Payment Surcharges) Regulations 2012. The regulations implement into UK law Article 19 of the European Union consumer rights directive. They prohibit traders from charging consumers above-cost payment surcharges. The Government have had concerns about the level of card surcharges that

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exceed the real costs in several sectors of the economy. Such surcharges are typically employed as a form of drip pricing, whereby the consumer does not see the final transaction cost until after completing several forms. That can make it more difficult for consumers to shop around. Under the regulations, surcharges for using a particular form of payment will become cost-reflective.

The provisions of the directive need to be implemented in UK legislation by December 2013 and brought fully into force by June 2014. Given the concerns that have been raised about these practices—notably by Which? and in a report by the Office of Fair Trading—the Government have decided to implement this part of the directive early. The payment surcharges regulations were made and laid before Parliament on 19 December last year under the negative resolution procedure. As with this order, they come into force on 6 April 2013. They are not of course the subject of the Motion today but they are directly related.

Article 2 of the order provides for the enforcement framework in Part 8 of the Enterprise Act 2002 to apply in relation to the regulations. This enables the relevant enforcement bodies to apply to the courts for enforcement orders against traders that have engaged, are engaging or are likely to engage in conduct that breaches the regulations, if that conduct harms the collective interests of consumers in the United Kingdom. Taken together, the regulations and this order will provide an effective enforcement regime in fulfilment of the directive’s requirements that adequate and effective means exist in national law to ensure compliance with the provisions of the directive and that penalties laid down for breaches of the directive are effective, proportionate and dissuasive.

Although the payment surcharges regulations implement an EU directive, Article 2 of the order specifies them as a domestic infringement rather than a community infringement for the purposes of the 2002 Act. This is because the obligations in the regulations take effect from April 2013, whereas the EU directive requires them to take effect only from June 2014. The order does not therefore strictly relate to infringements of EU law in the period up to June 2014. For this reason, and unlike the regulations, the order is subject to approval by both Houses of Parliament. I beg to move.

Lord Stevenson of Balmacara: Did the noble Lord, Lord Lucas, wish to speak?

Lord Lucas: I was just sitting down.

Lord Stevenson of Balmacara: The noble Lord’s fluency in so many matters suggested that he wanted to make a contribution. I am sad that he will not do so.

We on this side welcome the regulations. They are a good step in a direction that many noble Lords will recognise has been a source of considerable annoyance and concern to consumers over many years. In that sense, I want to understand better the approach that the Minister is taking here. He quite rightly explained that there are requirements because of the European Union directive to move in this direction. In many

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senses today is interesting because the earlier order that we considered also relates to a European Union directive. The choice there was to do something at the latest possible moment whereas the choice here is to take forward the timing of the European Union directive and use it to solve a problem that is, as he said, a domestic rather than a European one. That aside, it is still a good decision.

Underneath this is a history that the Minister touched on but is worth recording. This comes from a civil complaint from Which? that was referred to the OFT, and the OFT generated the momentum behind this. Yes, it could have happened because of the European Union directive but there is sufficient pressure internally. That also shows that the measures brought forward under the previous Government to try to provide for more active consumer protection in this area have been successful. As a result of that, we are seeing these changes today.

In the impact statement, to which the Minister referred, the assertion is made that these drip-pricing approaches—you do not know the full cost of what you are buying online until you get to the final screen and suddenly some additional charges are put in—are, of course, a frustration and an annoyance. It is interesting, however, that the impact assessment is quite coy about whether it will be to the long-term benefit of consumers. It is effectively saying, if you read between the lines, that while the changes in the regulations and the consequences of what is being proposed mean that companies will not be allowed to add these additional charges, or drip charges, to the price that they are quoting and we will therefore be able to compare prices better and get more for our money, in fact, the money that is being taken out of the system through drip pricing will probably re-emerge as additional charges within the main cost. The impact assessment says that,

“the overall price level may fall; however this is considered unlikely”.

I wonder whether the Minister has any more information on that. I looked carefully through the impact assessment and I could not see much documentation about what will happen to prices. Does he think that my assertion is overstated or about right?

My final point is that the CRD—and the regulations implementing it—covers most retail sectors, but does not include some. Will the Minister please explain what is going to happen in areas which are not covered by the CRD or by these regulations? What measures are the Government considering to bring forward in future years to deal with those?

Lord Kennedy of Southwark: My Lords, I thank my noble friend for that. I should have jumped in before him, so I apologise for not getting this right. I wanted to ask one question about the impact assessment and the opt-out for small businesses. I do not believe in extra burdens and regulation for businesses, but it seems odd to me that we seem to be saying that, by allowing business with fewer than 20 people to opt out, they can carry on overcharging customers. It seems odd and unfair that they will still be able to

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make these charges, but generally I think that this is a great order and I am delighted that it is being brought in.

Lord Popat: I thank the noble Lord. He is quite correct that this order will prohibit traders from charging consumers above-cost payments; in other words, the charges will not exceed the real cost of the goods or services bought from the trader. We are implementing this in December 2013, largely due to our own research and that of Which? magazine, which brought this to our attention. The European directive will be enforced in 2014, so it will be good for consumers. The European Commission is looking at the payment separately under the financial services regulations. We will obviously get this information in due course. It is our policy to exempt microbusinesses from the new regulations until 2014. They are small businesses that employ probably fewer than 10 people, but they are crucial for growth and we have to support and encourage them. That is my response to the questions about small businesses.

Lord Kennedy of Southwark: May I push the Minister a little further on that? It just seems very odd to me; I want to see small businesses and the economy grow, but if I am running a small business, I do not see why I should overcharge my customers. That does not seem like good practice and we should not allow it because it is not fair. I hope he will explain the point he is making. Why should small businesses be able to overcharge when big businesses cannot?

Lord Popat: As I said earlier, microbusinesses are crucial to growth. As a small businessman myself, I want to give value for money to my customers and do not want to make them pay any unnecessary charges, because I want to make sure that I get my repeat business. It is our policy is to exclude microbusinesses. The regulations will apply from June 2014 and not from December 2013.

Motion agreed.

Earl Attlee: My Lords, the Committee has made rather better progress than perhaps one noble Lord anticipated. I therefore suggest that the Committee break for five minutes.

4.26 pm

Sitting suspended.

Publishing Industry

Question for Short Debate

4.32 pm

Tabled by Lord Dubs

To ask Her Majesty’s Government what is their assessment of the future of the publishing industry in the United Kingdom.

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Lord Dubs: My Lords, I am grateful to all Members of the Committee who are going to speak in this debate. I also express my thanks to the ALCS, the Publishers Association and the Society of Authors for the help that they have given me and, I hope, colleagues in preparing for the debate.

People who are brought up with books in the home are lucky and privileged, and life must be very difficult for those who, in their childhood, never saw a book in the house. I am reminded of a book which I read many years ago by Brendan Behan, called Borstal Boy, about a teenager in a juvenile prison allocated, I believe, two books a fortnight. He loved books so much—or developed such a liking for books while he was in jail—that he rationed himself to only so many pages a day, to make sure that his two books lasted the fortnight before he got new ones. One day the prisoner allocating books gave him a seed catalogue as his non-fiction book. As Brendan Behan says, he was almost in tears, with nothing to read for part of that period. Let us also remember that in the last century, books were burned by people who saw books and publishers as the enemies of freedom and democracy.

Books and publishing are of enormous value to the UK economy. The publishing sector is estimated to be worth some £5 billion a year, of which book sales amount to £3.2 billion. The United Kingdom is one of four countries that produce 100,000 new and revised titles a year. The UK book market is the fifth largest in the world, and 41% of the sector’s sales come from exports; a larger proportion than that from any other country. Moreover, successful books often lead to film rights, another benefit to the UK creative industry. However, a large barrier to growth is the difficulty most authors have in finding a proper return for their professional work. The figures for what many authors earn show how little they get in return for their professional work. One or two authors scoop the pools and make a fortune, but for many it is a very hard job indeed to make a decent living.

I turn specifically to publishing and the publishing industry. Publishers are of course the guardians of an author’s copyright, without which authors would hardly be able to make progress; they invest in authors, and give advances and royalty payments; they identify good-quality writing and research; and they help in the distribution of books. Publishers and retailers work together to encourage reading, for example in bookshops with World Book Day and many other such schemes.

However, one of the key factors on the scene is the growth of electronic publishing. I understand that in 2011 electronic publishing increased by 366%—an enormous increase. There is no VAT on printed books but electronic books published in this country attract a VAT rate of 27%. In some of our competitors on the continent, such as France and Luxembourg, there is a much lower rate of VAT. Britain is at an economic disadvantage with our e-books, and may well suffer even more as other countries impose lower rates of tax. If books are more expensive, Britain will fall behind. We only have to look at the music industry

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and the recent decline of HMV to see how bits of our economy can fall behind very rapidly if they are not able to compete in a world market.

On the positive side, digital books help in self-publishing, so they open the door for some authors. But nobody can predict the way in which e-books will go. All we can say is that the digital market has grown dramatically of late and I believe that it now poses a threat. I do not want to be a Luddite or act like King Canute and say we do not want e-books because of course they are here. What is important is that printed books will not fall behind too much and can live in this new digital age.

I think it was Jamie Byng, the managing director of Canongate, who said that one of the things that bookshops do is encourage discovery. The same applies to libraries. There can be few things more exciting than for a young person to be let loose in a bookshop or library and see the wealth of books available there for his or her reading. That applies entirely to libraries. Yet we have seen recently a dramatic decline in the number of bookshops. The growth of e-books will encourage that decline. I really feel that bookshops are one of the values in our society. If we lose bookshops, something valuable will be gone.

I love going to book festivals. I have been to the one in Edinburgh frequently. In the Lake District, there is a superb book festival at Keswick that I go to most years. Yet, if we all had only digital books, how could there be book festivals? They would not mean very much if the output of a book festival was just a pile of Kindles and no books themselves. Yet the public lending right should be extended to e-books and audiobooks. That is important to get balance, but we have to be careful. We have seen the problem with Amazon, which scoops the pool in terms of electronic books at the moment but is based abroad and pays very little tax in this country. The whole thing is unbalanced and makes it very hard for British electronic publishers and above all for books to compete.

On the national curriculum, changes to that are being phased in very quickly and it is important that the publishing industry is given a chance to provide the necessary and appropriate books so that the national curriculum can work. That is one of those areas where more co-operation between government and the publishing industry would be appropriate.

Open access has been an important point. There was a report by Professor Finch about open access for future academic publishing. I am not certain that the Government have responded to that but it would be useful were they to say where they stand on this.

We have in books and publishing one of the most important creative industries in the country. We are renowned for having good creative industries. We are a world leader, as I showed earlier. It is important that, in their general approach to publishing and books, the Government should be aware that our leadership cannot be sustained automatically. They need to make sure that they support publishing.

It is important in terms of detail that we have a reasonably successful copyright regime, which should not be weakened in any way. If we do that, we weaken the economic success of our publishing industry and

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our books. There has been some talk about developing educational exceptions. However, we have to be careful. If an educational establishment can photocopy something that is appropriate for teaching purposes for 50 or 100 students, that of course will severely impact on the income of authors, which would be a retrograde step. Of course, one wants educational institutions to be able to work freely and easily but we also have to protect copyright in that respect.

I have already mentioned the difficulties of VAT and electronic books. I am in two minds about this. It would be fair that VAT on electronic books should be on a level playing field with printed books. I am also concerned about the impact of e-books. I should like to repeat what I have said earlier. I must admit that I have a Kindle, although that was before I discovered how little tax Amazon is paying. I now feel a little guilty every time I use my Kindle and it is useful for travelling. However, we should be careful. Anything we can do to sustain hardback books, bookshops and the publishing industry can be only for the good. We have a vital creative industry in this country, which the Government must support as fully as they can.

4.42 pm

Lord Black of Brentwood: I declare an interest as a director of the Telegraph Media Group. The noble Lord, Lord Dubs, is to be congratulated on securing this important debate. Publishing is the lifeblood of a free society. It forms the basis of democracy, our education system and our creative industries; yet its future is uncertain because of the massive impact of digital. Every publisher is faced with the central challenge: adapt your business model or die.

However, in order to find time to adapt, traditional publishers need two things; namely, as little regulation as possible and as much protection for the absolute right to copyright as possible. Both are under attack. I want to flag up three ways in which the Government can help. I agree with everything that the noble Lord, Lord Dubs, said about VAT. As printed material in the UK rightly attracts a zero rate, it is wrong that the electronic equivalent attracts the full 20% rate, which leaves UK publishers at a real commercial disadvantage. Given the rapid development of this market, there is now an urgent need to remove or reduce VAT on electronic publications. I would ask my noble friend if he would talk to his very kindly friends at the Treasury on this point.

As regards music publishers, I should declare an interest as a member of the Royal College of Music Council. Music publishing is an incredibly important business because it is at the core of our creative industries and certainty about copyright is crucial for it to flourish. Of specific concern therefore is the Government’s plan to water down copyright protection—again, the noble Lord mentioned it—which is of fundamental importance to its existence through extending the exceptions for educational use by introducing a so-called “fair dealing exception” which will be available to “all organisations and individuals”. This will increase exemptions in this area to include one-to-one music lessons, Saturday music services and music clubs, and could lead to a proliferation of photocopying of sheet

6 Feb 2013 : Column GC53

music, which would be a real loss for the UK music publishing industry at a time when it is trying to make life easier for schools which want to copy musical work. I ask my noble friend to ensure that any scheme is sufficiently carefully drafted to protect small, specialist providers of educational material. Perhaps he could write to me to explain how the fair dealing exception will work.

Finally, I come to newspaper and magazine publishing, where the internet has been fiercest. Here we need to ensure that the press in the UK is not subject to any form of statutory content controls which would hugely disadvantage it with global competition. But proposals from the EC High-Level Group on Media Freedom and Pluralism would usher in a draconian European system of controls, including proposals to force media councils to ensure that newspapers comply with European values. These proposals would push the EU into an information dark age and the Government must do everything that they can to stop it. I ask my noble friend for his support on my three points.

4.45 pm

Lord Howarth of Newport: My Lords, the impact of digitisation on the book industry has been seismic, and one might say, with Gramsci,

“in this interregnum a great variety of morbid symptoms appear”.

Swirling in the maelstrom, the publishing industry is, however, resilient and adaptable. So, too, are books. The codex was invented by the Romans. It has been refined in every century since, and it remains a technology that will be hard to beat.

What, then, is the role of the Government in supporting this important industry and the place of books in our national life?

The Government should create a fair tax regime. There should be zero-rating for e-books. Google and Amazon should pay their fair share. Meanwhile, Amazon might care to consider presenting a Kindle to every child, of whom 4 million in Britain do not own a book.

The Government should support publishing exports and deal firmly with trade barriers, piracy and infringement of copyright. They should ensure that their regime for intellectual property is coherent, fit for purpose and appropriately balanced as between the rights of creators and users. They should enable Parliament to consider, closely and carefully, any proposed changes to the legislation.

The Government should nurture reading within the national curriculum, working with the Publishers Association, allowing time in the school day for reading and putting libraries back at the heart of schools. They should support the charities which support books and reading. I single out the Reader Organisation, a charity which organises groups to read nothing but high-quality literature: groups of patients in mental health trusts, prisoners, substance abusers and looked-after children. It works in every case. The market for serious literature outside classrooms and middle-class homes can be developed.

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The Government should enable local authorities to give decent support to libraries and literary festivals, and to help independent bookshops compete on price. The Arts Council should provide sustained security for serious non-commercial literary publishing, particularly poetry. They should implement the extension of PLR to e-books and audiobooks.

In a letter in the Times on 1 January 1942, TS Eliot, EM Forster, JB Priestley, Bernard Shaw, Rebecca West and others wrote:

“Unless authority suffers a change of mind, the condition of letters in this country will be quickly past prayer … Books and the book trade are not merely another industry. They are the daily food of our mental and spiritual life”.

They went on to quote the Prime Minister, Winston Churchill, who had said:

“Books in all their variety offer the means whereby civilization may be carried … forward”.

The Minister is a civilised man, and he will endorse all that we have said. May we hope that our Prime Minister, too, will affirm the high importance of books and the publishing industry in our culture and economy?

4.47 pm

This is a timely debate. As we have heard, digital technologies are disrupting the business models that have sustained the industry for so long. They are redistributing power within publishing, between publishers and retailers and between different sorts of retailers. However, as my noble friend Lord Dubs so eloquently set out, there is no existential threat to publishing in the way that canals, for example, were replaced by railways. Millions will continue to derive huge pleasure from reading and, as long as they do so, there will be a publishing industry.

However, these new technologies are potentially disruptive for what is available to read. For all the growth of self-publishing which has been enabled by these new technologies, and it is welcome, publishing is for the most part still a fragile ecology, where a wide range of talents and skills remain critically interdependent. Creative artists, whether writing fiction or non-fiction, rarely, if ever, create on their own in a garret. They are supported by agents and publishers, all striving together for that elusive creative and commercial success which underpins not just publishing but all the creative industries which do so much for this country. Those support systems depend, above all else, on effective intellectual property rights.

This is a complex area of public policy, as the Government have recognised. Rightly, they are trying to balance the interests of rights holders, creators, consumers and users, and this has always been a difficult balance to strike. However, it has been made all the more difficult by the extraordinary developments in digital technology over recent years. In the light of this rapid change and the inherent difficulty of the task, no one can be certain that the Government have got the balance right. If they have not, there could be serious consequences for publishing and all the creative industries.

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I was therefore dismayed to see the Government reject amendments to the Enterprise and Regulatory Reform Bill in Committee, which unfortunately I was unable to attend, which sought to provide mechanisms to protect against such uncertainty—particularly the proposal for a new office to keep the interests of intellectual property rights holders in the forefront of public policy which, in such a rapidly changing world, and in which their importance has been overlooked in the past, seems simply prudent. To rely, as the Government seem to wish to do, on the existence of, in Sir Robin Day’s immortal phrase, here-today and gone-tomorrow Ministers seems to defy all the experience of recent years when the development of public policy in this area has painfully failed to keep pace with the implications of rapid technological change. I hope the noble Lords who proposed these amendments—I am glad to see that the noble Lord, Lord Clement-Jones, is down to speak in this debate—will submit them again on Report and that the Government will then reconsider their approach.

More generally, it is likely that the publishing industry will change even more in the next 10 years than it has done in the previous 10 years. Its customers—readers—will determine those changes, but public policy cannot stand aside. I look forward to the Minister setting out what the Government are going to do to support this vital industry.

4.50 pm

Lord Dobbs: My Lords, I must declare my interest as set out in the register, which reflects 25 years of earning my living as a writer. I add to the thanks expressed to the noble Lord, Lord Dubs, not only for introducing this debate but for doing it so splendidly. He gave us a fantastic tour d’horizon.

The publishing industry faces grave difficulties, but I want here to concentrate on the plight of authors—academic, literary and others. Without them, there would be no industry. Incomes are falling; the future is filled with uncertainties; the essential nurturing of creative talent that allows authorship to reach its peak is disappearing; and the internet age believes that it has inalienable right to read everything online and for free. There is an urban myth that anyone who has ever written a book that anyone else has ever heard about must be a multimillionaire. The chilling truth is that the average annual income for a full-time author is around £12,000 a year.

I want to make two specific points. The first echoes the point made by the noble Lord, Lord Dubs, about the public lending right. It is a scheme whereby authors get a token payment when their works are lent out by public libraries. The PLR supports 23,000 authors every year. Those payments are limited and typically very small, but they are vital. It is not a subsidy; it is a payment in return for authors and publishers agreeing to allow their works to be loaned out through the library system. Yet the Treasury has cut PLR. It amounts to less than £7 million a year, but it has been cut. Still worse, it is refusing to extend PLR to audiobooks and e-books. It is a little like the Government commandeering a taxi and then refusing the fare.

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My second point, about intellectual property rights, has also been referred to by the noble Lord, Lord Dubs, as it was by the noble Lord, Lord Wills. The Government are preparing to move us into the digital age by making it easier to access and copy authors’ works, particularly in schools. Cut through the language and what that means is that schools will be able to copy an increasing amount of work without paying the authors. It is of course vital that we support education, but I do not see the Government asking dinner ladies or the suppliers of desks and dusters to come to their rescue. But authors are, sadly, easy targets.

I trust, and I am sure, that the Minister will go away and think about all these matters. I do not need to bore him any more than I bore him in the Bishops’ Bar about some of these issues and I know that he is well aware of them. I hope that he will take on board, if not always necessarily agree with, the advice of the Society of Authors, the Publishers Association and other relevant bodies. It would take very little to correct some of the problems that have arisen—a little more care, a little more understanding and a little more vigour in protecting authors’ intellectual property rights. If that is not done, I fear that there is a real possibility that we will turn around in 20 years’ time to discover that those who should have been the cream of our literary talent, the lifeblood of British creativity, have cast their pens aside and found themselves other jobs.

Shakespeare did not write for posterity—

Earl Attlee: My Lords, I am afraid that this is a time-limited debate.

Lord Dobbs: I beg your pardon. Let me then sum up very quickly by saying that it would be a terrible pity if the book industry were to be left with little but celebrity memoirs, chick lit, TV spin-offs and books of such pale shades of grey that they were all but invisible. That would surely be the saddest tale that we could have written.

4.55 pm

Baroness Rendell of Babergh: My Lords, I thank my noble friend Lord Dubs for introducing this much needed debate on the future of the publishing industry. I declare an interest as someone who next year will have been a published author for the past 50 years. The publishing industry is a vital component of the creative economy and employs 33,000 people across 2,500 companies. In addition, there are a large number of professional writers working full or part-time who create works on which the industry relies. The quality and range of British writers is recognised around the world, and 40% of publishing industry revenues are derived from exports—a bigger proportion than in any other country. The UK book market is the fifth largest in the world and the largest e-book market in Europe. Despite this, the Society of Authors is concerned that several of the Government’s current policies are creating barriers to growth and hindering the development of the publishing industry.

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The largest obstacle to growth for most authors is financial. In a 2006 survey, the Authors’ Licensing and Collecting Society concluded that writing was a very risky profession, with median earnings of around £4,000 for all authors. Most authors earn very little and cannot live by their profession alone. In principle, the public lending right increases their income. The Digital Economy Act 2010 extends PLR to audiobooks and e-books, but these payments have never been implemented. This is patently unjust. That provision should be brought into force and extra funds should be made available to cover PLR payments for such lending.

Print books attract a zero rate of VAT, but their electronic equivalents are subject to a rate of 20% in the UK. Some other EU countries have reduced the VAT rate on e-books, so that the UK is now at a competitive disadvantage, as my noble friend Lord Dubs pointed out, as e-books sold in the UK are more costly than those sold elsewhere, making it doubtful that they have ousted printed books as reading matter. The Spectatorrecently carried a cartoon in which two women and a child are sitting on a park bench. One of the women is reading. The mother says to her little girl, “Look, darling, she’s holding something called a book”. I hope we have not got to that point yet. I have a Kindle but do not much like it. There is an urgent need for removing VAT on e-books to avoid the UK falling behind European competitors.

Authors would benefit enormously from an educational and general environment from primary level upwards that emphasises the value of culture and the importance of copyright. Intellectual property rights are lucrative to the UK economy. Knowing that they own copyright in what they have written and what that means can be a cause of excitement and pride in students and generate an understanding of the harm done by piracy.

School libraries should be compulsory, and reading and writing for pleasure encouraged; but in general, they are not. How many times have I been told, “I do not have time for reading”? How many homes have I been in, often beautifully furnished and decorated, but where there are no books? High street bookshops, local theatres and libraries all underline the importance of books, culture and learning and should be supported. The habit of culture should be as much a fundamental aspect of the environment as, for example, the country’s architectural and historical heritage.

I will finish on an optimistic note for the publishing industry. When I was first published, there were only two or three literary festivals a year in this country. Now, every county, city and town holds one. The large number of books sold at these events and the enthusiasm shown for reading by those who attend them must be a sight for sore eyes for publishers. The Edinburgh Festival is a large bookstore in itself, and the village of Hay-on-Wye has more bookstores in its streets than anywhere else in the world.

4.59 pm

Lord Smith of Clifton: My Lords, I, too, thank the noble Lord, Lord Dubs, for this timely debate. Over the years, I have had a range of experiences in the

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world of publishing. I was on the board of the weekly magazines

New Society

and, later, the

New Statesman

, and was also a director of Gerald Duckworth & Co book publishers.

I must declare an interest in that I am currently on the editorial boards of two learned journals—

Government and Opposition

and

Public Policy and Administration

,

both of which posts are unpaid. The introduction of open access, as recommended by the Finch report and aggressively promoted by the advocates of STEM subjects, raises serious concerns in academia among specialists in the arts, humanities and social sciences. Both the Royal Historical Society, of which I am a fellow, and the Political Studies Association, of which I am vice-president, have made representations to BIS and its Universities Minister, David Willetts, and to the House of Commons Science and Technology Select Committee.

As proposed, open access will require authors to pay fees of up to $1,000 to the publishers of learned journals to cover the costs of expert reviews as to worthiness and of editing, which will have to come from already squeezed research budgets. This will have a deleterious effect on young, aspiring academics. In the arts and social sciences, articles are usually single-authored. By contrast, STEM articles are almost always multiauthored and half the average length of those in the humanities and social sciences. Up front publishers’ fees will be cheaper and more widely spread for STEM authors. The effect of this differential costing may well influence university departmental heads to allocate publishers’ fees disproportionately to senior, already tried and tested, academic authors rather than to risk the possibility of greater rejection of younger ones.

Secondly, there is the whole question of copyright, to which other noble Lords have alluded, and ownership of intellectual property. Open access will accord free use of UK research that has been funded by the UK taxpayer to all and sundry all over the world. Thirdly, it adds to the operating profits of publishers of learned journals, who make no financial contribution to sustaining scholarship and research; they simply enjoy harvesting it.

Those who undertake research in the humanities and social sciences are not opposed to some form of open access. However, they are concerned that the proposed scheme is being adopted without full consultation, is too STEM-compliant and will enable scholarly intellectual property to be plundered. Her Majesty’s Government and, particularly, Mr David Willetts need to think again. It seems that Mr Willetts and Dame Janet Finch, a distinguished social scientist, have been too easily seduced by the blandishments of STEM interests and forgotten those of their original university training. In winding up, will the Minister say whether Her Majesty’s Government are open to further consideration?

5.02 pm

Lord Lucas: My Lords, I am a publisher but take a very bleak view of the future of publishing if Amazon goes unchecked—not that it will harm me, but it will kill most of the rest of the industry.

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Amazon is an amoral monopsony in its growth phase. It is using extremely low margins to drive market share. It is using aggressive tax avoidance to afford those low margins. It is not just us that it does not pay tax to; it does not pay tax to anybody. It is being allowed by Governments to do this because it is seen as a nice, friendly company to consumers. Indeed, in the days when I shopped with Amazon, I found it a comfortable place to shop but it is coming to dominate the book industry. It is clear that it will soon have over half of all the book trade, physical and virtual. It is causing taxpaying businesses to die. One has just to look at what happened to HMV, which has died largely because of tax competition. A lot of that came from the likes of TheHut out of the Channel Islands but a good deal of it was mediated by Amazon. We now have nowhere to shop on a large scale. The internet retailers have control and the internet retailer that will have control above all is Amazon.

Suppliers will then become dependent on the one retailer. It is clear where Amazon intends to go after that: it intends to take out the publishers. It is already doing that in the States, forming its own relationships with authors and publishing its own exclusive-to-Amazon books. At the end of the day, what need has a company with three-quarters of the book trade of independent publishers? It can do everything itself.

It will continue to use a wide range of predatory tactics to do that. Amazon trawls the web to make sure that it always offers the lowest price on anything. It compels suppliers to charge it less than they do anybody else, on pain of being dropped—either individual projects or entirely. It runs this thing called Amazon Marketplace, where little traders can go, but it knows everything that happens in that marketplace: all communications between a business and its customers, what is being sold and at what price. When it sees a good opportunity, it goes to the supplier and undercuts the trader.

If you use Amazon fulfilment, it will clean up your complaints file so that bad notices will not remain for others to see. If you do not use Amazon fulfilment, it will not. It provides a home for people who are breaching copyright by importing books from outside the appropriate area. It provides a home for people who are running VAT scams. In one way or another, if we do not do something as a Government to remove the tax bias that benefits it, to enforce our existing laws and to put it through the Competition Commission, we will find that we have been steamrollered by Amazon.

5.05 pm

Publishing is an industry in absolute turmoil. I am not sure that even the contributions to the debate thus far have brought this up strongly enough. This is true not just in the UK but in the US and other countries, too. One can say that absolutely no one knows where these trends will lead. Many people have their best guesses, but nobody actually knows.

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There are three intertwining factors in the transformation of the publishing industry. First, as has been said by other noble Lords, e-books have arrived with a bang after several years in which they made little or no headway. It is important to recognise how massively popular they are in some sectors. In the United States, for example, among more popular titles, more than 60% are now produced as e-books. Will the traditional book survive? Will the e-book survive? One should not think that the e-book is the cutting edge here. E-books themselves are being transformed by all sorts of multilayered devices; you can hold conversations with authors and so forth. The e-book is certainly not the end of the story.

Secondly, the publishing industry here and in many countries is becoming hollowed out, with ever fewer large conglomerates at the top and an array of small publishers at the bottom—all of them, in a way, following a precarious existence. The rise and rise of Amazon, as has been mentioned by the noble Lord, Lord Lucas, is one main factor in this. Publishing is not really about the production of books but about marketing and distribution. Because of its massive size, and its mainly automated warehouse and delivery system, Amazon absolutely cuts prices to the bone.

Thirdly, a trend which overlaps with these is the emergence of self-publishing on the internet, where an orthodox publisher might not be needed at all. There is lots of experimentation going on here. For example, one publisher invites prospective authors to pitch their book proposals on its website. If sufficient people pledge to buy it, the author can then go ahead and write it, reversing the traditional relationship. It is not clear that this will succeed. These are overlapping trends, but they are creating something fundamentally new after centuries of domination by traditional book publishers.

I have three brief questions for the Minister. Often, technological innovation is followed by a “back to the future” reaction; for example, when nylon was invented, people went back to wool and cotton. The same thing might happen to traditional books. For this reason, I hope that the Government will not take too big a scythe to public libraries.

Secondly, as other noble Lords have asked, what is the latest position on open-access publishing? Many publishers, as well as academics, are quite worried about that and the Government’s endorsement of the Finch report. What will it do to traditional journal publishers?

Thirdly, apart from the issue of taxation—following on from what the noble Lord, Lord Lucas, so eloquently said—are the Government happy with the dominant position that Amazon has taken in the book trade? In conclusion, I hope that no noble Lords will be caught reading a Kindle in a Starbucks.

5.09 pm

Lord Stevenson of Balmacara: I thank my noble friend Lord Dubs for initiating this debate and all noble Lords for their contributions, which have been of a very high standard indeed. As my noble friend Lady Rendell said, this is a very timely debate, and we appreciate that. My noble friend Lord Giddens warned

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us that this is an industry in which conditions are worse than we think. They may get much worse before they get better, if indeed they do. We need to bear in mind also that this is a complex industry, like all creative industries. With some notable exceptions, we have focused today mainly on the creative side—the agents and publishers—but we also have to think about the retailing end: the designers, the marketers, the logistics and, of course, the concept of electronic publishing, which is an underlying thread here.

This debate has really been about whether the current leadership that this country’s publishing industry deservedly has can be sustained and whether there will be growth. There have been a very large number of questions for the Minister and I do not intend to cover them all. I hope that he will be able to give a particular mention to them all but, if not, that he will write to us about them. I think that there will be too many, even for the time that he has been allocated. However, from the questions that were raised, the first was on this vexing question of the public lending right, which is so important to authors and publishers. Of course, it does a much wider job by raising people’s interest in books and writing and, more generally, in education. Will and can that be extended to e-books?

On VAT, the differential between the printed and electronic versions is obviously a major issue. What approach are the Government taking on this? I know that the Minister will say the usual thing when he comes to reply: that taxation is a matter for the Chancellor of the Exchequer. Of course it is but, six weeks out from the Budget, surely budget submissions will have been made. Can the Minister confirm that DCMS has raised this issue with the Chancellor and is making the right sort of noises, along the lines that he has heard today?

On copyright, the issue that comes up time and again is whether the Government have got their approach right, along with the question of who is actually in the lead on this issue. In debate on the Enterprise and Regulatory Reform Bill, the noble Viscount, Lord Younger, confirmed that he was the Minister for Intellectual Property and therefore has, within BIS,

“a role to champion the IP system as a whole”.

Indeed, he was proud of the fact,

“that no other country has such a post”.—[

Official Report

, 28/1/13; cols. GC414-16.]

He felt that that solved the problem. However, what then is the role of DCMS in relation to copyright? Perhaps the Minister could say a few things about the approach that he is taking in this matter and how the department gets its point of view, which we note to be significantly different in terms of discourse from that which is currently being led by the IPO. There is much more sympathy with some of the points that have been made today. It would be a pity if that was being boxed out by government structures.

On the key issue of education and the circularity of the approach that has to be taken across libraries and supportive reading, and about the role of English more generally—but particularly on reading and writing and on creative work in the EBacc—it would again be

6 Feb 2013 : Column GC62

useful if the Minister could explain what DCMS’s role in that has been, whether meetings have been taken and whether it is making progress.

Finally, can the Minister say a bit more about the general role of the DCMS in this industry? Many of the issues that we have discussed today are, as I have said, largely in the gift of BIS and not that of DCMS. Can he therefore explain a bit more what its role is?

5.13 pm

Lord Gardiner of Kimble: My Lords, I, too, thank the noble Lord, Lord Dubs, for securing this debate. It is certainly true to say that I have learnt a great deal today from the expertise of all your Lordships. I have listened and it is indeed a privilege to reply. Perhaps I might say that there were quite a number of questions and I hope that noble Lords will be tolerant if I write a general reply wherever I have not dealt adequately, as I would believe, with their questions.

Without doubt, the UK’s creative industries make a vital contribution to national life but they also have a key role to fulfil in helping our economy to grow and helping the people of the UK to compete globally. Employment in the creative industries has grown at double the rate of the economy as a whole, and 1.5 million people are currently involved in creative employment. They are, in many respects, British culture and I was very much taken by what the noble Lord, Lord Howarth of Newport, said about culture. I am sure that the Prime Minister is very keen and that he champions British culture too.

The entire publishing sector is the largest of our creative industries. It contributes £11.6 billion a year to the UK economy and employs some 244,000 people across 9,700 companies, which cover books, e-books, academic journals, national and local newspapers, magazines and print music, to name a few. Our publishers are the largest exporters of all the creative industries. With 40% of the sector’s revenues coming from export—the noble Lords, Lord Dubs and Lord Howarth of Newport, referred to this—that is a bigger proportion than in any other country.

However, as noble Lords have mentioned, it is not limited to print alone. UK consumer e-book sales grew by some 366% in 2011, as the noble Lords, Lord Dubs and Lord Giddens, referred to, making the UK the largest e-book market in Europe. The UK is a market of early adopters. Consumers in this country are quick to take up new products, services and channels, particularly in entertainment. In publishing, this appetite on the part of consumers has been matched by the willingness of publishers to explore new opportunities, in spite of the challenges that new technologies undoubtedly present, as the noble Lords, Lord Wills and Lord Giddens, referred to. I reaffirm my personal support for bookshops and the many happy hours I continue to spend in them. I have to admit that I have never bought a book from Amazon.

The Government are committed to fostering an environment that will stimulate world-class content creation. We want the current level of success and investment not just to continue but to increase. I am very conscious of course that the noble Baroness, Lady Rendell, and my noble friend Lord Dobbs, whose

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work is so widely admired at home and abroad, are in their places. Indeed, I very much hope that there will be many more generations of their like in British culture.

The issue of VAT was raised by my noble friend Lord Black, the noble Lords, Lord Dubs and Lord Stevenson, and the noble Baroness, Lady Rendell. As has been pointed out, Luxembourg and France at present operate a reduced rate of VAT on e-books. Under existing law, e-books are electronically supplied services and therefore should be taxed at the standard rate. The European Commission has launched infraction proceedings at the European Court of Justice against Luxembourg and France on this matter, the outcome of which is awaited.

My noble friend Lord Black of Brentwood raised a point about the recent EC report on pan-European press regulation. The Government have noted the contents of the report on media freedom and pluralism and await with interest any resulting debate and the response from the European Union. However, the Government have no intention of allowing European institutions to regulate the British press. The Government believe that this is a matter for individual member states and will resist any European legislation in this area.

Many noble Lords referred to copyright, including my noble friend Lord Lucas, the noble Baroness, Lady Rendell, and the noble Lords, Lord Dubs and Lord Howarth. It is vital that the publishing industry is supported in addressing copyright issues. I am mindful of the difficulties the music industry has suffered in its own digital transition, which my noble friend Lord Lucas specifically referred to. The Government are acting in a number of areas to ensure that the UK copyright framework meets the demands of the digital environment while continuing to maintain the success of sectors such as publishing. An appropriate regime is vital for copyright in the UK. The Government are very well aware of the range and strength of views and interests, which is why the Hargreaves review of intellectual property and the development of government policy since then have included broad and deep consultation.

Last December, the Government outlined a number of ways to support efforts by creative industries to protect copyright, in particular: action to educate consumers about the importance of respecting copyright and paying creators; launching a superfast patent processing service; a campaign for smaller businesses; and looking at enforcement. The Government are exploring with the City of London Police and the content industries what more can be done to bring to book the criminals who make a living from counterfeiting and piracy, particularly online. Protections for the interests of property rights owners and creators must be built into the revised framework. The noble Lord, Lord Dubs, mentioned that in particular.

The Government have sought to increase the number of options available to rights holders looking to protect their intellectual property online—the noble Lord, Lord Wills, referred to that—in particular, by ensuring proportionate responses are available at every level, from court action to a voluntary response. The Government have supported collaboration between

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industry and law enforcement and a regular round table for those involved is now held at the Department for Culture, Media and Sport under the chairmanship of my honourable friend the Minister for Culture, Communications and Creative Industries. The noble Lord, Lord Stevenson, in particular raised that. The round table has seen several successes, including an agreement with internet advertisers to cut off payments and advertising to illegal sites.

On exceptions, noble Lords raised in that connection the potential impact of changes to copyright law on business, for example the impact on exceptions to copyright rules on music publishing for educational use. The noble Lord, Lord Dubs, and my noble friends Lord Black of Brentwood and Lord Dobbs mentioned that. I will write to my noble friend Lord Black about the particular matter he raised. The Government want teachers to be able to use creative materials in the classroom without copyright being an obstacle but—I emphasise “but”—this should not be done at the expense of our educational publishing sector, on which our schools depend. We will give teachers more flexibility to use copyright works in new and creative ways but they will not be given a free pass. It is important that we strike the right balance. Copyright is the means to reward creativity; it generates investment, stimulates wider dissemination and delivers balance.

The noble Lord, Lord Dubs, mentioned the national curriculum. The Secretary of State for Education is due to announce the statutory consultation on the new national curriculum shortly. Publishers will therefore be able to consider the proposals for all national curriculum subjects. Again, the matter of young people was raised by the noble Lord, Lord Howarth of Newport. I entirely agree that reading and libraries are a great source of inspiration for young people—and adults. Next week, I am due to answer a Question in the Chamber on libraries. Libraries come under the budgets of local authorities and I am sure that we will have a full discussion in the seven minutes permissible on that next week. Again, I am personally a staunch supporter of open access to libraries. There are many exciting opportunities. New libraries are being opened and communities are coming together to ensure that reading and the opportunities that it provides to young children are well understood and recognised.

The Government also recognise that there are significant potential threats and opportunities with regard to how, for instance, text and data mining may be affected and how these technologies are used. I think we would all agree that the priority must be to develop the best environment for scientific and medical research. That has to include a successful research publishing sector. I am very mindful of what my noble friend Lord Smith of Clifton and the noble Lord, Lord Giddens, said. I will write to all noble Lords on the Finch review because I would like to consider the matter and then write in full detail. It is fair to say that the Government will proceed carefully in this sector.

The Government are supporting the industry through the expanding intellectual property attaché network abroad, which is already in China, Brazil and India. There is a new one now in south-east Asia. Progress on the EU patent front is a major step forward.

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I appreciate that the sector faces many challenges. Noble Lords today have raised them in full and I am mindful of them.

Lord Giddens: Would the noble Lord care to say one or two words about Amazon and its industry dominance?

Lord Gardiner of Kimble: I should like to finish my few words. My commentary on Amazon is already on the record. However, many opportunities can be seen by the way in which the sector is embracing the digital revolution. The Government recognise the sector’s importance for cultural and economic reasons, and are working closely with the publishing industry to create an intellectual property environment which sustains success and rewards creativity.

PACE Trial: Chronic Fatigue Syndrome/Myalgic Encephalomyelitis

Question for Short Debate

5.25 pm

Tabled By The Countess of Mar

To ask Her Majesty’s Government what assessment they have made of the effects of the PACE trial (Pacing, graded Activity and Cognitive behaviour therapy: a randomised Evaluation) on provision of health and social care and welfare benefits for people with chronic fatigue syndrome/myalgic encephalomyelitis.

The Countess of Mar: My Lords, I declare my interests as chairman of Forward-ME, a vice-chair of the All-Party Parliamentary Group on ME and a patron of a number of ME charities. The PACE trial was funded by the MRC, the Department of Health, the Scottish Chief Scientist Office and the Department for Work and Pensions to the tune of £5 million. The researchers, led by chief principal investigator, Professor Peter White, have consistently and confidently advised medical professionals and the Government of the success of cognitive behavioural therapy, or CBT, and graded exercise therapy, or GET. The PIs’—the principal investigators’—objective was to reverse the behavioural and cognitive factors which they believe to be responsible for the perpetuation of symptoms and disability. Despite the extensive biomedical evidence base of peer-reviewed papers which undermines their belief and despite the fact that the MRC now states that there is evidence of,

“inflammatory mechanisms in the brain and spinal cord”,

their view has prevailed.

Throughout the history of medicine there has been a predominance of doctrine over science and currently there is a similar conflict between the doctrine, which asserts that CFS/ME results from a disordered psyche, and the scientific view that it is a devastating organic disease. We do not know what disorder was being studied because in March 2011, the chief PI wrote to the editor of the Lancet. He said:

“The PACE trial paper ... does not purport to be studying CFS/ME but CFS defined simply as a principal complaint of fatigue”.

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To whom, then, can CBT and GET be safely applied? The Minister cannot answer because on 17 January her right honourable friend Norman Lamb confirmed that no assessment of the PACE trial has been made. Furthermore, the PACE trial results have not been presented transparently. This is not uncommon and Dr Ben Goldacre, known for his “Bad Science” column in the Guardian, has initiated a campaign calling for publication of all results of all trials, not just selective results. Already more than 7,000 signatures have been collected, including from high-profile organisations such as the MRC, the Cochrane Collaboration, the Public Library of Science and the BMJ. It calls for all universities, ethics committees and medical bodies to recognise that under-reporting of trials, as occurred in the PACE trial, is misconduct. Misreporting of clinical data leads to harm, wastes money and prevents scientific progress.

“the authors worked hard to define recovery based on the data available from the PACE trial”.

Investigators must define their primary outcomes before a trial begins and abide by them, not define recovery based on the trial data. Once the PACE trial was under way, the PIs changed the outcome measures so that the very same score on physical functioning—the SF-36 scale—represented both eligibility to enter the trial and “normal” function at the end of it. Indeed, according to the Lancet, a participant could have achieved a worse score at the end of the trial yet still be classed as “recovered”.

When funding was granted and ethical approval agreed, a participant had to score 85 to be considered recovered but by the time of publication in the Lancet, this “recovery” score had dropped to 60, which was five points lower than that required to enter the study. This illogical situation resulted from departure from the published protocol. To overcome this, the chief PI created his own meaning of terms; for example “recovery” does not mean recovery as the world understands it, and a return to “normal” does not mean a return to normal health. The chief PI does, however, concede that,

“improvement and not reaching research criteria are different from recovery”.

We do not know how many patients reached the initial target for recovery because the PIs have refused requests to release that data. Instead, they introduced significantly lower measures of improvement and abandoned an objective measure, the wearing of an actometer. The results of the subjective reporting in the six-minute walking test after graded exercise therapy were very poor, placing participants below the performance of patients awaiting heart or lung transplant. Had the PIs achieved their anticipated level of success, a level consistent with their claims over many years and a major factor in the award of research grants, they would have achieved international acclaim.

What hit the headlines was theLancet “Comment” claiming a 30% recovery rate, yet the best that has been shown from CBT and GET is a maximum 15% improvement rate. A recent paper by the PACE authors, published on 1 February and purporting to show

6 Feb 2013 : Column GC67

recovery rates, is a masterpiece of obfuscation. The authors have substituted “recovery” for “reversal” of CFS without any explanation, yet they admit that,

“although many patients improved, the question of how many patients recovered remains unanswered”.

As one of the members of the Forward-ME Group said:

“It really is quite bizarre that there is absolutely no data whatsoever in this paper on what most people would regard as markers for recovery … a return (or ability to return) to full time employment or education … no longer claiming any DWP sickness or disability benefits”.

The original claims made for recovery made it into the media and into the minds of GPs, DWP officials, social care providers, private insurance companies and even the National Institute for Health and Clinical Excellence. Professor Trudie Chalder, one of the PACE trial PIs, said that,

“twice as many people on graded exercise therapy and cognitive behaviour therapy got back to normal”.

This was widely but incorrectly interpreted as “recovery”.

The fact is that, as opposed to the spin that accompanied the publication of selective results, only 15% of patients improved with CBT and GET, leaving 85% with no benefit from those interventions. Furthermore, of the combined CBT/GET groups of 321 people, 91% experienced adverse events, and only those who were well enough to attend regular hospital appointments were included in the trial; the severely affected and housebound were excluded. This is not mentioned when the “recovery” rates are discussed. From where have the PIs derived the figure of 22% for recovery in their latest paper?

Where does that leave us? The only information, published in A Cost-Effectiveness Analysis of the PACE trial, shows that there was no significant improvement after CBT and GET in the average number of days lost from work or the number of participants who lost days at work. In fact, claims for income-related benefits, illness and disability-related benefits, and from private pensions and income protection schemes, increased across all intervention groups during the trial.

As it is cheaper for CFS/ME to be dismissed as a behavioural problem, patients are denied access to diagnostic facilities by NICE guidelines, and very few medical consultants specialise in anything but the supposed “behavioural” aspects of the disease. ME charities are inundated with cries for help as their members struggle with the benefits and social care systems. Bed-ridden and housebound claimants are put into the WRAG for ESA and are too ill to appeal. If they manage to get to an Atos assessment, they feel that they are not listened to and are told that they are fit for work. The DWP part-funded the PACE trial because it was assured that CBT and GET would get people off benefits and back to work, but the promised return-to-employment figures have still not been provided by the PIs.

I am relieved that the Medical Research Council’s expert group, under the chairmanship of Professor Stephen Holgate, is launching a UK chronic fatigue

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syndrome and myalgic encephalomyelitis research collaborative on 22 April. It recognises that in light of the,

“magnitude of the disease burden on those affected and their families involving both adults and children, there is an urgent need to increase research effort in the field”.

Some £1.6 million has already been allocated by the MRC. There is an equally urgent need to assess the effects that the outcome of the PACE trial has had upon people with ME. However, how can the Government act responsibly in assessing them when the results have not been presented transparently?

It is widely accepted within the ME/CFS community that the PACE trial PIs changed the primary outcome measures with the intention of artificially inflating the success of CBT and GET—treatments they promoted for more than 20 years—and that, consequently, they are guilty of scientific misconduct. They believe that White and his colleagues have shown that they are not responsible guardians of the valuable data collected in the trial. It is therefore a matter of great importance that they are re-analysed by an independent group, using the original criteria for recovery and the positive outcomes described in the published protocol. This would enable healthcare commissioners to make decisions based on data that they know have not been misrepresented.

I know that the Minister understands the problem and ask that she and her colleagues from the other affected departments order such an assessment so that we do not consign thousands of people to the shadows. To quote Orwell, we must not allow the PACE trial to,

“give an appearance of solidity to pure wind”.

5.36 pm

Lord Winston:We are all very grateful to the noble Countess, Lady Mar, for introducing this debate. I will be very brief and I apologise to her for missing the first minute of her speech. Very surprisingly, we were much earlier than expected and, unfortunately, the name of the previous speaker, the noble Lord, Lord Gardiner of Kimble, was still on the screen when I came into the Moses Room.

This syndrome causes persistent fatigue for more than six months, as well as various other symptoms. It is not relieved by rest, which is and has been puzzling for a long time. It is not the case that there has not been a lot of research. I have looked, for example, at MEDLINE, where we can see that there are 5,874 research papers on this condition. It was not only the Medical Research Council that funded the PACE survey; it is very clear that extensive work has been carried out and many countries have been involved.

Recently, I made a list of papers published in the past year. I will not bore your Lordships with all of them but we know of, for example, Moss-Morris at King’s, Dr White at Barts, Dr Lehmann in Bavaria, Dr. Fjobback in Denmark, Fukuda in Japan, Jackson in Australia, Lewis in Bethesda, Maryland—part of the NIH funders there—Wibourg from Hamburg, Bleijenberg from Amsterdam, Newton from Newcastle, Brooks from Huddersfield, Wessely from King’s and Vincent from the Mayo Clinic in Minnesota. There are many other names, but these are very prestigious

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departments of medicine. Effectively, they all come to the same conclusion; namely, that at the present time, the best treatment is almost certainly along the lines of cognitive behavioural therapy.

What is different about the PACE study is that it is a detailed, controlled study which has extremely rigorous entry into it. Unlike most previous studies, I think I am right in saying that—perhaps the noble Lord, Lord Alderdice, will correct me if I am wrong—there was only one drop-out, which is fairly remarkable. It means that it is extremely comprehensive, so there are very good data. It looked at a series of issues about treatment and it seems pretty clear to me that cognitive behavioural therapy is effective in something like one-fifth of patients, which is a bit more successful than the noble Baroness claims. I do not think we should underestimate that. They go some way to explaining that were cognitive behavioural therapy to be used perhaps on a slightly more financially secure footing with rather more sessions, it would be likely to be of more benefit, particularly toward the end of the treatment.

One issue is that far too frequently, we see that many of our colleagues have been vilified. Simply because they are psychiatrists does not mean that they are not doctors. That is a real issue, and it is not only psychiatrists who have been vilified. For example, Myra McClure, who was sure that there was not a viral causation for this disease, was absolutely vilified and decided to give up her research. This is also true of Esther Crawley, who even went so far as to report her vilification to the press and changed her telephone number. As some noble Lords will know, Dr Simon Wessely claims that he had death threats, which is very serious.

The problem, of course, is that to say that these vague conditions appear almost certainly to have a psychiatric basis is not to say that they are less important, or that the person who is suffering from them is in some way to blame. It means that we must find rational ways of treating them.

I commend this study. It is an example of really excellent research done in a very difficult phenotype and done very well indeed. The authors are to be congratulated on demonstrating clearly that cognitive behavioural therapy and, to a certain extent, some exercise in addition, is a real improvement on what has happened for these patients before.

5.41 pm

Lord Alderdice: Like the noble Lord, Lord Winston, I am grateful to the noble Countess, Lady Mar, for giving us an opportunity to look at this question, although I have some doubts as to whether your Lordships’ House is the best place to evaluate scientific evidence and do the exploration. I think that repeated research by other colleagues and demonstration within the scientific community is the way forward. I declare a previous interest as a consultant psychiatrist in the NHS, where I treated a number of patients with these types of symptoms.

The history of medicine is that we have tried to clump together groups of symptoms which appear relatively regularly together, and seem to have indication

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of possible outcome, and maybe of management and treatment. However, these are temporary constructs. It is perfectly possible that they are a whole bunch of different disorders which overlap in various ways. Even to talk about it as a condition seems to be making certain presumptions. Certainly, to conclude that there is a definite organic basis, other than to say that in every disorder there are organic and psychological elements, does not mean that we dismiss the psychological—on the contrary. When we think, we can only do so because some things are going on in our brains, which are a physical substrate.

My own position would have to be that we really do not know what we are dealing with. We are dealing with a whole range of symptoms and complaints. We do not know the etiology. The prognosis is variable with different people. We must continue working as best we can.

In the mean time, it is terribly important that we try to evaluate how to manage the problems that people come along to us with. We do not properly understand the schizophrenias; that is a group of different disorders. Yet we still have to manage the large numbers of people with these problems. That is the case with these people who come along with post-exertional fatigue, memory difficulties, pains and so on.

When we try to do that, it is not uncommon for patients to tell us that such and such a thing helps and that such and such a thing does not. I am not a particularly strong advocate of CBT, as some colleagues know, but I remember when I was using CBT with some patients suffering from depression. They would come along and I would ask them to write a diary of what they were doing every half hour and evaluate it. They would say, “I do not feel like getting up in the morning. I am too depressed and I cannot get out of bed”. I would say, “Look, I know that you don’t feel like it, but please try to get out of bed, structure some activity for the day, do it on an hourly basis and let’s see how you are”. Hey presto, when they did that, the thing that they felt would not make them better actually did. They were surprised about this.

That is one of the dilemmas about what patients think will help. Sometimes they are intuitively right and sometimes they are intuitively mistaken. The only way that you can understand this is to do some work in a scientific way. That is what these colleagues in this paper have tried to do. Some of them will have had particular notions about etiologies, but the point is that they were simply looking at what worked and what did not. What is the outcome? The outcome is that CBT and graduated exercise training are helpful for some people to some extent, and more helpful than the other things which have been suggested. It is not helpful to everybody and it is probably not completely helpful to almost anybody but it is better than doing nothing and better than the other things that have been suggested. There are a lot of scientific tables and graphs but that is the basic outcome.

To me, that is good news because it gives us some indication of things that might be helpful. It also tells us that an awful lot more work is necessary to find out what we are dealing with. If somebody came along and said, “There are such things as chest diseases, we

6 Feb 2013 : Column GC71

should treat them in such and such a way, and the cause is this”, we would say, “Yes, that is true but there is a difference between asthma and cancer”. They might say, “Oh, really? Well, let’s explore that”. We are at that kind of level with this set of symptoms.

It is really important that when people give themselves to scientific enterprise in this area that we do not pillory them for their efforts. They may come up with some outcomes that people do not want to believe or that are not very welcome. We psychiatrists are quite used to the idea that often people would rather have a physical explanation for things than a psychological one. It is dreadful if we encourage that by saying, “Well, of course it is not psychological”, as though somehow it is a smear on a patient to have psychological difficulties. We must be very careful about that. I do not suggest that Members of your Lordships’ House would do that but it is something that happens out there in the community and about which we must be careful.

I am glad that we have had the debate. I trust that we understand the very early stage we are at. It is good that there is some indication here: the paper demonstrates that CBT and GET are helpful, and probably more helpful than other things, but there is a lot more to do. We should encourage people to get into the research work, not just for the ideology issue but to find what helps, and we should not pillory people who come in because that only drives people out of the research. That is the last thing we want to see.

5.46 pm

Baroness Meacher: My Lords, I thank my noble friend Lady Mar for tabling this Question for Short Debate concerning the PACE trial. I must declare an interest as former chair of East London NHS Foundation Trust. Professor White, a leading researcher in the PACE trial, works as a consultant in that trust in addition to his research post at Queen Mary, University of London.

CFS/ME can be a seriously disabling syndrome. I like to refer to it as a syndrome because it seems to be not one but a number of diseases. NICE compares the physical symptoms of CFS/ME with those of multiple sclerosis, systemic lupus erythematosus—if I can pronounce that correctly—and rheumatoid arthritis, probably three of the most fearsome illnesses one can think of. To make matters worse for sufferers, as the noble Lord, Lord Alderdice, so rightly said, the causes and disease processes of CFS/ME are not yet understood. That must be a deeply frightening thing for any patient.

Doctors can misdiagnose sufferers or, worse still, dismiss them as not really physically ill at all. I understand that for some, some psychological aspects may be important and for others they may not. I am aware of people who have had major viruses and suddenly been struck down, having led very active lives, getting on with things and being fine. We have to be very careful about any assumptions, whether physical, psychological or whatever.

CFS/ME is all too real. Of course we need much more research. I await the outcome of Professor White’s cytokine research later this year, for example. We look to the MRC and others to prioritise this distressing

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syndrome. Thankfully, the MRC has two boards—it probably has others, too. One funds studies such as PACE and the other funds studies into the immune system, and viral and genetic considerations. The PACE study did not in any way affect funding for organic CFS/ME research. That is terribly important because there are fears that it may have done.

As the noble Lord said, the experts believe that in time a number of distinct diseases will be identified that currently fall within the CFS/ME label. In the mean time, NICE recommends CBT and/or graded exercise therapy for people with mild or moderate CFS/ME because these are the interventions for which there is the clearest evidence of benefit to patients. No doubt in time treatments that attack the causes and achieve better and faster results will be developed but in the mean time it is a great step forward that, as in the PACE trial, 22% of patients recover—I agree that there is debate about the word “recovery”—after only 13 sessions of CBT or graded exercise.

Meanwhile, 60% of patients achieve significant improvements in both fatigue and exercise levels after the same period, according to the PACE study, which certainly fits with my experience of the limited number of people—about half a dozen—who I know. A meta-analysis showed a 50% recovery rate after one year. These results are very significantly better than spontaneous recovery rates or those following alternative available treatments. From our most helpful discussion on Monday, I understand that my noble friend Lady Mar respects the PACE study but, very reasonably in my view, has grave concerns about the spin put upon the results. People have to be very careful. We all know what happens once things get into the media but the spin that is put on these things is really important for patients. Things can be very hurtful.

I understand that the DWP may treat people as workshy if they have not undergone a CBT/GET treatment regime. At least a quarter of PCT areas do not have any specialist services for these patients. Others have nothing but grossly inadequate services at a pathetic level. It is essential that the DWP and, indeed, insurance companies take account of the non-availability of such services in many areas. Will the Minister pass on this concern to the noble Lord, Lord Freud? The DWP also needs to be aware that CFS/ME patients can take time to improve. I am not an expert but out of the people I know, several have needed much longer than one year to recover acceptable levels of functioning.

In terms of returning to work, the PACE trial had no effect whatever on the numbers of CFS/ME patients in work. I would not expect it to have done. These people have been, on average, out of work for two and a half years before they entered the trial, and from all the work that numbers of us have done over many years, we know that it is incredibly difficult to get people back into work if they have been out of work for two and a half or three and a half years. However, the social care costs and the need for family support were reduced. People were much better—not necessarily completely better but an awful lot of them were much better.

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I now want to address a few other issues arising from the PACE study, including the fact that 10% of patients deteriorated during the trial. I understand that all these deteriorations resulted from life events or other infections during the trial period. We know well that serious life events or further infections do—or can—cause relapses in this horrible set of illnesses or this syndrome. Secondly, there is the question of whether ME patients benefited from the PACE trial. I am reliably informed that 51% of the patients in the PACE trial had been defined as having ME. I know there are all sorts of debates about that definition, but there was no significant difference in the outcome of treatment for patients who had been deemed to be suffering from ME relative to patients who had been given the CFS label.

Concerns have been expressed about the 11 serious adverse reactions to treatment. The 10 “possible” adverse reactions were equally distributed across the four treatment types. There is no indication that CBT or GET caused any problems. There was one “probable” serious adverse reaction, which was in the medical treatment group and was a reaction to an anti-depressant. Some of us are very familiar with the fact that people can have reactions to anti-depressants, but there is no evidence that CBT or GET can be dangerous.

The PACE trial is the largest ever trial of treatments of this debilitating set of conditions and has received acclaim from clinicians and scientists across the world. Some have wanted to criticise it for changes to the protocol, but those were made before the analysis and were approved by the independent trial steering committee; they were not fixes. The changes were minor and did not affect the results or conclusions in any significant way. Any potential conflicts of interest were published alongside all the papers, and none applied to the statisticians who did the analysis.

It is very encouraging that the Association of Young People with ME accepts that the NICE guidelines are useful for patients and healthcare practitioners. They are right. In conclusion, will the Minister give the Committee an assurance that the Commissioning Board will, in future, give equal priority to the specialist services needed for CFS/ME to that which they give for rheumatoid arthritis and MS?

5.54 pm

Lord Layard: My Lords, I too greatly welcome this debate. This is a terrible condition and we are talking about hundreds of thousands of people who are suffering from it. While it is clear that although there have been many studies relative to the seriousness and pervasiveness of this condition, there is far too little research into what is causing it. I want to focus on treatment, as there have been terrible misunderstandings and misconceptions put about on that score.

I want to make just four points. First, the issue of what causes the condition is often quite different from how we can best treat it. This is such a basic point but it is not fully understood by many of the people suffering from this condition. Coronary heart disease may be caused by cholesterol but we treat it with a stent. In the same way, chronic fatigue may be caused

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by a virus yet the best treatment available at the moment may include psychological therapy. This form of treatment implies nothing about what we believe to be the cause. People who suffer from CFS, and who in almost all cases feel that it is not psychological in origin, are surely making a mistake when they reject psychological support for their condition on the grounds that this implies something about its cause. In their own interest, they should focus on what is the best possible treatment available on the evidence.

Secondly, we have quite a lot of evidence about which treatments work. More will surely be discovered in future and some of them will surely be biological. In the mean time, we have a large amount of evidence that both CBT and graded exercise therapy enable many more people to recover than if the only treatment they have is standard medical care. My main point here is that this is so, whatever the definition of recovery. It is wrong to suggest that this all depends upon that definition; you can put the cut-off for recovery in many different places and you will always find that people who get CBT and graded exercise therapy do better than people who have only standard medical care. There are many studies preceding PACE to show this. Of course, that is the main finding of PACE, which I would say is a fine piece of work by all normal standards. Some of the criticisms are really misleading but some of them have been answered already.

I come back to this question of the change in the protocol to stress that this was made before any analysis was done of the results. It was not that they looked at the results and said, “Let’s change the recovery criteria”. The changes were made because of discussions affecting the whole research world and agreed by the trial steering committee. What is very interesting is that a separate paper has been written simply on the recovery issue, which uses five or six different criteria of recovery. Again, in the PACE study it is shown that whatever cut-off you use, you get the same difference between the outcome of CBT and graded exercise therapy. There really is not a conjuring trick going on here and it is wrong for this impression to be given to the community of people who are suffering, if that leads to them not receiving help which they could really benefit from. Instead of criticising the study, we should be rejoicing that we again have more evidence that something can be done which is better than standard medical care.

My third point has, in a way, been made before but given the strength of this evidence that we have these treatments which work, it is shocking that they are so little available. This is part of a wider story of the non-availability of psychological therapy. The survey that was done by Action for M.E. found that a large number of PCTs were providing no specialist treatment clinics for this condition—or were not providing any kind of care, let alone this most evidence-based care. That is a disgrace and I hope that the Minister can say something about that.

The treatments are not unsafe, a claim that is often put about due to the fact that, of course, some people get worse during treatment. The only argument against the treatment, if it were the case, would be if people

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who did not receive it were less likely to get worse. Again, the statistics are absolutely clear: the proportion of people who get worse in treatment is no higher than that for people who get worse who are not in treatment. There is no argument whatever that this is unsafe.

My fourth point is about how we can get a better deal for this large group of sufferers. Obviously, the worst possible way to get it is to turn the area into a battleground. It gives the commissioners the perfect excuse for doing nothing and gives people of good will, who might come in and try to help people with this condition, a serious disincentive for getting into this field. As we know, and has already been said, many—or certainly some—of the people who work in this area have received repeated insults and even death threats. I pay particular tribute to Sir Simon Wessely at King’s College London, who has led the field for many years in this area and has stuck to it, despite all this harassment. He and his colleagues—

Lord Wallace of Saltaire: My Lords, the noble Lord is in his seventh minute. We are very tight on time and I am worried that the Minister will not have time to reply.

Lord Layard: I will stop at this point.

6.02 pm

Baroness Hollins: My Lords, I also thank my noble friend Lady Mar for raising such an important topic. I have read the research very carefully in preparing my short contribution.

We know that some patients who develop symptoms of CFS/ME will recover fully but that the majority go on to have a fluctuating long-term condition. I agree with the noble Lord, Lord Alderdice, that there is no single cause for this condition. Some 10% to 12% of people who have glandular fever develop the symptoms of CFS/ME, but there are many other precipitants, too. It is a very distressing condition for people to have and is confusing and difficult for families, friends and employers, particularly because the condition may fluctuate in its effects so dramatically and vary in its severity. It is not surprising that people with CFS/ME may feel that they are not believed and that their family and friends are unsympathetic at times. Imagine living with an illness that fluctuates, recurs after mild exertion and is associated with what people describe as brain fog? As it stands, a very limited range of therapies are available and, understandably, this patient group has ended up feeling overlooked and neglected.

The greatest weapon against illness and disease is robust, peer-reviewed research. Research into both causation and the factors that sustain symptoms is important, as is research into effective interventions. I am particularly pleased that current biomedical research funded by the MRC is trying to understand some of the mechanisms at play, including by looking at mitochondrial function, autonomic dysfunction and sleep disturbance. It is essential that we continue to look at the best possible treatments.

I will speak briefly about the PACE trial, which of course most noble Lords have spoken about and which enrolled 640 participants. Just last week, the follow-up

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study, looking at recovery after one year, was published in the journal

Psychological Medicine

. Noble Lords may know that the trial showed that an average of only 13 sessions of CBT or graded exercise therapy, over just six months and as a supplement to good specialist medical care, had rates of recovery of 22%. My understanding is that, by “recovery”, the researchers included the fact that after a year these patients no longer met the criteria for CFS/ME. This would be heralded as a fantastic outcome for the treatment of MS, Parkinson’s disease or cancer. Only 8% of those receiving adaptive pacing therapy and 7% of those receiving just specialist medical care achieved the same degree of recovery. In other words, the successful treatments were three times more likely to lead to recovery than the comparison treatments. Of course, that was after just one year, but follow-up is continuing, and I look forward to hearing whether these results will be sustained. I hope the Minister will agree with me that it would be very useful for this study to be funded for follow-up for five years, particularly given the fluctuating nature of the condition.

Better outcomes are achieved for all illnesses, from heart disease and cancer to schizophrenia and depression, when the overall well-being of the patient—biological, psychological and social—is taken into account. That is not to say that there is no physical reason behind the onset of illness, or that physiological effects are not continuing to maintain or modify the disease process. My noble friend’s debate today is concerned with both health and care, including access to benefits. It is yet another reminder of the importance of a holistic approach to care, an intertwining of body and mind. This complex interaction has been acknowledged since ancient times but somehow, over the past 100 years, with the elucidation of many physical causes for illness, the mind-body connection has been somewhat forgotten. Thankfully, this connection has again been brought to the fore by the Government’s welcome commitment to parity of esteem between physical and mental health. The Royal College of Psychiatrists, of which I am a former president, has long been concerned about the physical effects of psychological stress and the psychological effects of physical stress. Interdisciplinary research—which brings together, for example, the neuropsychiatrist with the immunologist—is vitally important.

Could the Minister clarify whether the arrangements being made to ensure that evidence-based treatments, such as those tested in the PACE trial and recommended by NICE, are commissioned and that they do not fall through any gaps caused by what has been called an orphan status for this condition? To explain what I mean, CFS/ME can be classified under both neurological and psychiatric disorders for clinical purposes; it is not clearly claimed by any one specialist group as being its primary responsibility. This means that many people diagnosed with CFS/ME will not be referred to a specialist centre and that the treatment they need will just not be available. Research will shine more light on this condition and begin to distinguish whether subgroups of patients will be more responsive to different new treatments being evidenced and introduced.

Research is needed into all aspects of the illness so that more effective treatments can be found. This must include both biological aspects and any psychological

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factors that may sustain or lead to the further deterioration of the illness such as, for example, major life events, which are known to cause a relapse in CFS/ME patients. Thankfully, the MRC has recognised the past underinvestment in this poorly understood condition—or set of conditions—by highlighting it as a priority area for research. Through the particular efforts of Professor Stephen Holgate, the CFS/ME research collaborative mentioned by my noble friend will be launched in April, bringing together researchers from all relevant disciplines with patient groups and charities. This is so important. The future is looking brighter for people with CFS/ME and the constructive collaboration of people with different perspectives and contributions will, I hope, prove to be a major step forward.

6.09 pm

Baroness Wheeler: My Lords, I, too, welcome this debate and acknowledge the work of the noble Countess, Lady Mar, on CFS/ME as chair of Forward-ME and vice-chair of the All-Party Parliamentary Group. Although a last-minute stand-in in this debate for my noble friend Lord Hunt—he is due shortly in the Chamber for the Statement on the Mid Staffs report—I am not new to this issue. As the noble Countess regularly contributes on CFS/ME to health debates I have participated in, most recently our extensive debate last November on neurological diseases, initiated by my noble friend Lady Ford. What is new to me is the focus on the PACE trial and the opportunity to hear from our expert medical and psychiatrist colleagues about the wider issues and perspectives, and about the trial itself: what it covered, who was involved, its findings and results and the wider, extensive research that is currently being undertaken across the world.

As we have heard, the PACE trial was the largest-ever randomised controlled trial of treatments of CFS/ME, primarily funded by the Medical Research Council following competitive peer review, with its main findings concerning efficacy and safety published in the Lancet. It was designed to compare improvements in safety after CBT and GET with outcomes after ADP and SMC. The patients were recruited from hospital clinics in England and Scotland, and were able to travel to clinics to receive treatment. The trial was not designed to test treatments in patients with severely disabling illness. As a non-expert, it seems to me that some of the criticisms and disappointments levelled at PACE do not fully recognise this.

As we have heard from noble Lords in this debate, the trial provided clear evidence that both CBT and GET were better than ADP or SMC in improving both symptoms and disability. In fact, all the treatments were found to be safe without any serious reactions to treatments in any of the treatment groups. I understand that a paper published last week showed that CBT and GET are three times more likely to bring about recovery than any other treatments.

Like other speakers, I want to underline the importance of looking to the future. On the NICE guidelines, I support noble Lords who stress that the key issue about them is making sure that they are actually implemented, so that patients can receive effective treatment and care wherever they live in the UK.

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In the debate on 20 November, the noble Baroness, Lady Northover, assured the House that all the neurological and specialist conditions would have “equal priority” under the new NHS commissioning arrangements, and that this would mean that the Cinderella conditions should be improved. Can the noble Baroness outline the steps that the Government are taking to ensure that the commissioning arrangements provide appropriate and adequate specialist care for patients suffering from illnesses such as CFS and ME which are not easily classified under normal commissioning arrangements? To help this, will the Government give CCGs guidance on which illnesses should qualify under special commissioning arrangements? Can she reassure us that this guidance will include ensuring that guided exercise training is provided by qualified and trained specialist therapists?

6.12 pm

Baroness Northover: My Lords, I thank the noble Countess for initiating this debate. I apologise for the fact that my noble friend Lord Howe cannot be here, as he is in the Chamber making the Mid Staffs Statement. I, too, am a last-minute replacement.

I know that the noble Countess has a particular and personal interest in the subject and I pay tribute to the way in which she continues to raise issues of concern in your Lordships’ House, as well as her unswerving commitment to improving the experience of people living with CFS/ME. I recognise how distressing and debilitating the condition can be for individuals, their carers and their families. Equally, I recognise the difficulties that many patients face in getting the treatment and care they need to help them manage their illness and, where they can, make a recovery; we have heard that this afternoon. I am sure that we all agree that the most important thing is to ensure that patients receive the treatment and care that they need.

At this point it is worth acknowledging that, while many patients feel let down by the system, many patients have had a positive experience and have worked with health and social care professionals to manage their care effectively. It is also important to acknowledge that doctors and other professionals working in this field are highly committed to providing the best possible care for their patients. We want to see people with CFS/ME being listened to when it comes to decisions about what type of treatment and care may best meet their individual needs and, across the country, many doctors are working with their patients to achieve this. I hear what my noble friend Lord Alderdice says on this.

There is no doubt that there is widespread uncertainty surrounding this condition; that has shone through in this debate. There is controversy, disagreement and divided and often polarised opinion about its causes and the best way to treat it. The kind of issues raised by the noble Countess today have surrounded the debate for many years. We have seen how passionate but how often opposed are those seeking to address these problems in the debate this afternoon.

It is an unfortunate fact that despite a great deal of worldwide research—the noble Lord, Lord Winston, made clear how extensive this is—we do not yet know

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definitively the cause or causes of CFS/ME: whether it is a disease; a condition, as the noble Baroness, Lady Hollins, described it; or a syndrome, as the noble Baroness, Lady Meacher, described it. The noble Lords, Lord Winston and Lord Layard, surely are right that it is concerning if researchers are in any way intimidated as they seek to clarify these problems.

CFS/ME is not alone in being mystifying. We do not know the causes of most cancers and other diseases such as Alzheimer’s. That lack of knowledge, however, has not stopped us from seeking the best forms of treatment. Many of these diseases are treated well even though we do not know their causes. I quite agree that more research is needed. In the mean time, patients want access to the best treatments that are available. So far, the only treatments that seem to have shown any benefit in clinical trials have been cognitive behaviour therapy and graded exercise therapy, but I have heard what noble Lords have said in regard to those.

This brings me to the PACE trial that has prompted today’s debate. The MRC’s decision to fund this trial was based on the fact that there was a lack of high-quality evidence to inform the treatment of CFS/ME and, in particular, on the need to evaluate the treatments that were already in use and for which there was insufficiently strong evidence from randomised controlled trials to support their effectiveness. The decision to fund this trial was based on the MRC’s usual rigorous peer- review process for clinical trials, as noble Lords have emphasised. The experts who reviewed the application were satisfied that the design put forward was of high quality, would provide useful evidence to help doctors and patients decide whether any of the four treatments to be evaluated was likely to be worth pursuing, and would help to inform decisions on the provision of treatment by the NHS. The noble Lord, Lord Winston, and others argued that this was a controlled and rigorous study. All agree that research is needed.

I shall try to address the challenges that were raised by the noble Countess, Lady Mar. She expressed concern about the selection method for participants. I assure her that having neurological symptoms, such as memory difficulties or muscle weakness, did not exclude anyone from taking part in the trial since these symptoms were medically recognised symptoms of the condition. While researchers used the Oxford definition to define the condition in the PACE trial, participants were also assessed to see whether they met the international Centers for Disease Control and Prevention criteria to see whether the effects of treatments were different in those who met this alternative definition. The independent members of the trial steering committee reviewed and agreed the plans for secondary analysis.

The noble Countess, Lady Mar, also expressed concern about the recovery statistics and other areas in relation to the protocol. As for all MRC-funded studies, it is the responsibility of the investigators and the relevant journals, guided by peer reviewers, to determine how findings are published and when. The investigators’ first paper on the outcomes of the PACE study was published in the Lancet in March 2011. A later paper was published in August 2012, which dealt with the cost-effectiveness of the interventions. Further papers will be published, including papers showing a long-term

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follow-up after two and a half years. The noble Baroness, Lady Hollins, made a very important point about follow-up, and no doubt the MRC will bear that in mind and will look at this debate. Follow-up in all these trials is very important.

The noble Countess, Lady Mar, asked about severely disabled patients being excluded from the trial. Patients had to be able to attend hospital for treatment, but a number needed mobility aids and others received treatment by telephone when they were too unwell to attend a clinic once they had been recruited. She also asked whether the trial data could be reanalysed. As she will know, there are ethical and legal barriers to releasing data to a member of the public without consent when these data contain medical information that might identify the patient. The main outcome data have already been independently analysed by a Cochrane Collaboration group and a paper is being prepared for publication. I know that she will look at that with interest.

An often voiced criticism is that the money spent on the PACE trial would have been better spent on research into causes. As the noble Baroness, Lady Meacher, indicated, the two are not mutually exclusive. While understanding the cause of the condition is obviously important, if potential treatments are available, it is equally important to test their effectiveness so that they can be introduced into service. Of relevance to this is that the PACE trial tested adaptive pacing therapy, which had not previously been tested in a large trial and which is supported by patient organisations. Various noble Lords have paid tribute to the quality of the research, even though the noble Countess, Lady Mar, was more sceptical.

As the noble Countess is aware, the findings of the PACE study reflect the recommendations in current NICE guidance. I understand that concerns have been expressed that patients may have their choices about care restricted because the PACE trial supports their non-recommendation by NICE or that patients may be forced into treatments they do not want because they are recommended. I assure noble Lords that clinical guidelines published by NICE help to promote consistency but recognise that patients are individuals who may require different forms of management. Clinicians are therefore free to adapt the guidelines when deciding, in consultation with their patients, the most appropriate treatment. NICE routinely reviews the need to update its guidance in order to take account of the latest available evidence. As the noble Countess is aware, CFS/ME is currently a highlighted area and a high priority for the MRC. The high-quality research stimulated by the MRC’s recent call will add to the future evidence base.

Concern has been expressed that the findings of the trial will be used to reduce the number of people with CFS/ME on state benefits. That was flagged up briefly by noble Lords. I should like to dispel straight away the idea that CFS/ME is not recognised by the Department for Work and Pensions as a potentially serious condition. For example, there are no targets for finding individuals fit for work in the work capability assessment process. The noble Baroness, Lady Meacher, raised this particular issue and asked whether patients who do not comply

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with the CBT or take the treatment recommended to them might have their benefits withdrawn. I can assure her that that is not the case. Entitlement to employment support allowance is not based on compliance with specific treatments and anyone claiming ESA will undergo the work capability assessment. That assessment is founded on the premise that eligibility should not be based on a person’s condition or the treatment regime for it but, rather, on the way that that condition limits their functional capability. I am happy to flag this debate to the DWP, as the noble Baroness asked me to, in regard to the availability of services.

The noble Baroness also asked me about the NHS Commissioning Board and whether it would give equal weight to a number of other diseases. I can assure her that the mandate to the NHS Commissioning Board will ensure that improvements are made to the quality of life for all people living with long-term conditions, including this one.

The noble Lord, Lord Layard, asked me about specialist treatment provided by PCTs. In the new system, clinical commissioning groups will be responsible for commissioning specialist CFS/ME services. As he knows, they comprise front-line clinicians. We certainly hope that they will therefore have a good understanding of their local communities, including patients with these problems. The NHS Commissioning Board will hold those CCGs accountable for the services that they commission, as well as providing support—for

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example, through the development of commissioning guides. I understand that Martin McShane, long-term conditions lead at the NHS Commissioning Board, has already met with the CFS/ME patient groups to discuss their concerns. Those discussions will inform the board’s work as things move forward.

The Government’s aim is to help individuals who are suffering from these problems both to receive appropriate treatment and to get back to work where they can do so. They also seek a better understanding of the situation that these individuals are in. The PACE trial was funded to respond to the concerns of patients, carers and doctors that more research into CFS/ME was required. Of course, we all hope that health research results in people becoming healthier and fewer suffering from these kinds of problems. This is obviously a major focus for the MRC in making its individual funding decisions.

In conclusion, I hope that the noble Countess will agree that we are sympathetic to the needs of patients with CFS/ME. I appreciate, as do other noble Lords, her many concerns. I hope that I have reassured her that we are investing in improved services for CFS/ME patients and in an expanded research programme—noble Lords have emphasised the importance of research moving forward in this area—and that this should make a difference to the lives of the many people affected by this condition. That is the Government’s priority.